crossroadsI can’t pass up writing about the astonishing reduction in global carbon emissions: they’re down 2.6 percent this year, according to the International Energy Agency (IEA). And the trend in the United States is even more pronounced:

greenhouse gas emissions in the United States fell 3.8 percent in 2008 compared with 2007; they are estimated to be down another 6 percent this year.

Though a 10 percent reduction is welcome news for the climate, the method was without question a terrible one. And now that the obligatory platitude is out of the way, how about a little snark?

One might contrast this way of achieving reductions—financial fraud so epic that it hobbled the global economy—with the method preferred by folks like Al Gore — a gradual and predictable limit on carbon emissions coupled with strategic investments in clean energy and efficiency. I mean, you can reduce emissions either way, but one strategy makes a lot more sense for the economy.

So sorry, AIG, no Nobel Prize for you!

In fairness, however, the credit for reducing emissions doesn’t belong solely to worsening economic conditions. As the Financial Timesexplains:

For the first time, government policies to cut emissions have also had a significant impact. The IEA estimates that about a quarter of the reduction is the result of regulation, an “unprecedented” proportion. Three initiatives had a particular effect: Europe’s target to cut emissions by 20 percent by 2020; US car emission standards; and China’s energy efficiency policies.

The distinctive feature of these government policies is that, unlike financial chicanery, they are actually good for the economy. Energy efficiency investments are very often a no-brainier from a fiscal perspective, while stronger auto emissions standards save consumers money and weaken the bonds to volatile commodity markets. And setting long-term emissions limits is exactly the sort of predictability and clarity that market economies need to function well.

So as it turns out, there is an economically sound way forward, and it involves neither melting icecaps nor market meltdowns. What it does involve is a diligent public sector—good government, in other words—designing thoughtful policy for the long term.